Last Monday's decision by the Second Circuit Court of Appeals, reversing a lower court's March 2007 ruling that Cablevision's plan to deploy a Network Digital Video Recorder (nDVR) violated copyright law has huge potential implications across the video landscape. DVR, Video on Demand and broadband video are all close cousins jockeying for position in the race to provide on-demand choice to consumers. So for those interested in broadband's deployment, it's important to understand ongoing developments in DVR and VOD as well.

Today, I'm pleased to have Mugs Buckley and Colin Dixon, analysts at The Diffusion Group weigh in with their thoughts on last week's ruling.

The Cablevision nDVR Decision: Winners, Losers and How it Relates to Broadband

by Mugs Buckley and Colin Dixon, The Diffusion Group

The August 4th Cablevision nDVR decision by the Second Circuit Court of Appeals opens up the possibility that the company will be able to move ahead with its original nDVR plan, much to the dismay of the plaintiffs, a group of major studios and TV broadcasters. For a primer on the significance of the decision, we offer the following thoughts:

WHAT'S AN nDVR vs. a DVR?

The root of the nDVR case is where a TV viewer's recorded show gets stored: on a hard drive in a DVR located in the home (as is the current model) or on a hard drive in a cable operator's network (as Cablevision and other network operators prefer).

WHY DOES IT MATTER?

To the viewer, it doesn't; since using either approach allows recording and playback of programs.

But since the correlation between digital recording and ad-skipping is well-documented, the studios' and networks' key concern is that nDVR could dramatically accelerate recording usage, thereby accelerating the ad-skipping trend. That would be a big blow to their economic model. For Cablevision and other operators, it's all about cost. Storage in the network is much cheaper than a truck roll to a customer's home and individual DVR box deployments. nDVR also allows the operator to leverage their huge investment in VOD systems.

WHERE DO THINGS GO FROM HERE?

While Cablevision won its appeal, the ruling is far from conclusive. The next step is for the lower court to revisit this ruling, so when Cablevision will actually be able to roll out the nDVR service is totally unknown. They must wait for the lower court to decide if they agree with the upper court's decision, which is not expected before the end of 2008. And of course we expect the studios and content providers to file subsequent appeals.

WHERE DO OTHER OPERATORS STAND?

If Cablevision wins, other cable and telco network operators will implement nDVR too. For example, Time Warner Cable's CEO Glenn Britt told Multichannel News on August 6th, "We've said for a long time that a centralized network DVR is a better engineering solution than having hard drives all over everybody's home. If this particular court case is upheld, we will deploy that."

AND THE BROADBAND IMPLICATIONS?

Should the ruling stand, a company like TiVo could possibly be able to capitalize on it by delivering the nDVR experience over broadband. Of course, TiVo's been shifting its model to work with service providers anyway, so this may not be a strategy it would pursue.

As for other broadband implications, this is where the interplay between nDVR, VOD and broadband video can get murky. For instance, sites like Hulu and ABC.com are already storing programs in the network (albeit in a way that they control) for on-demand consumption. This obviates the requirement that the consumer take the action to record say the latest episode of "The Office" in a DVR or nDVR environment.

And of course, the content providers control the ad insertion (although presumably they could do that for nDVR as well). Other than making ALL TV programs available vs. just the subset currently available for broadband delivery (and VOD) and the fact that nDVR can be viewed easily on TVs, which is not currently the case for broadband, the differences between nDVR and broadband start to feel quite blurry.

As you can see, nDVR has lots of implications for everyone in the video value chain.

Bottom line: Much more to come. Stay tuned.